Below is Mr. Courson’s oral statement, as prepared for delivery.

“Thank you for the opportunity to testify this afternoon on H.R. 703, a new bill intended to promote bank liquidity and lending.  Of particular interest to MBA and its members are the changes to the HOPE for Homeowners program, the focus on addressing servicer liability, and the improvements to the Troubled Asset Relief Program.

Let me begin with the HOPE for Homeowners program, which was intended to be a tool to help delinquent homeowners avoid foreclosure, but has had trouble getting off the ground.

H.R. 703 would remove the obstacles that have prevented its optimal use.  For instance, the bill drops the requirement that borrowers have a housing debt-to-income ratio greater than 31 percent.  It also increases the maximum loan-to-value permissible under the program from 90 percent of the appraised value of the property to 93 percent.  These changes will allow more borrowers to qualify and also make the program more attractive to lien holders, who will be able to take a smaller write down.

MBA also supports language in the bill that addresses HOPE for Homeowner’s exceedingly high annual premiums by granting FHA flexibility in setting annual premiums that are in line with other FHA products.  This reduction will instantly make the HOPE for Homeowners program more affordable for troubled borrowers.

MBA appreciates the committee’s efforts to provide servicers with greater legal protections for performing loss mitigation activities.  Although most pooling and servicing agreements allow for modifications and workouts, not all do.  Some PSAs that allow modifications and workouts may contain conflicts, while others may be silent on modifications, thus increasing the risk of liability for the servicer.  These problems have limited servicers’ ability to help borrowers.
 
MBA, however, is concerned that investors may challenge the validity of this safe harbor.  If these challenges prove successful, servicers will be exposed to significant legal liability and losses for breaching their contracts – despite their actions being within the spirit of the law.  MBA would recommend that Congress include a provision that would indemnify servicers from liability if the safe harbor provision is deemed unlawful.

Moving to the changes to TARP, MBA endorses this committee’s efforts to provide additional clarity and direction to the Department of the Treasury in how these funds are allocated.  Above all else, we believe it is important to return TARP to its original purpose, which was to purchase non-performing assets off banks’ balance sheets.

And while the government’s focus to date has been on righting the residential mortgage market, we at MBA also recognize that the broader credit crisis has negatively impacted the commercial and multifamily real estate sectors.  Our response needs to be holistic and address the significant challenges facing these multi-trillion dollar markets.

Mr. Chairman, because this is a hearing about bank liquidity, I want to take a minute to bring to your attention an issue that has hamstrung many independent mortgage bankers, and that is the shortage of warehouse lines of credit from commercial banks.  These lines of credit are used to finance loans held for sale from origination to delivery into the secondary market.  Warehouse lending capacity has declined dramatically – from over $200 billion in 2007 to approximately $20-25 billion in 2008.  For the originator that depends solely on warehouse lines of credit, this reduction could reduce liquidity, extinguish their lending business, and adversely impact the consumers in their market, stifling the real estate recovery before it has a chance to get off the ground.

Congress and the administration should take steps to maintain existing lines of warehouse credit and create new lines of warehouse lending by providing a short-term federal guarantee of warehouse lines that are collateralized by FHA, VA, GSE, and RHS-eligible residential mortgages that are held for sale by mortgage lenders.

My written testimony discusses this issue at greater length, as well as other steps Congress and the Obama administration can take to restore faith in the mortgage industry and avoid future foreclosures.  First and foremost, Mr. Chairman, we need stronger regulation of mortgage bankers and brokers.  By working together, we can build a better regulatory system, one that works for consumers and industry alike.  MBA and its members want to be your partners in these efforts.

We also need to continue to strengthen FHA by investing in new technology and allowing them to hire staff on par with other financial regulators, and we need to increase loan limits for FHA and the GSEs.  And we need to remember Ginnie Mae, which is now securitizing about 40 percent of the mortgage market – more than Fannie or Freddie – yet they have less than 100 employees.

Mr. Chairman, thank you for this opportunity to share our views and ideas with the committee.”

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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,200 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA's Web site:  www.mortgagebankers.org.